Thursday, April 04, 2013

Kuroda Swings, Clears the Bases

BOJ Governor Haruhiko Kuroda got essentially what he (the market too) was asking for, by way of mostly unanimous decisions to boot (the announcement in English, here). Am I surprised? Yes. The two dissents, both by one board member, were a little too arcane for me; in any case, they appear to have little practical consequence. Now, Kuroda owns it. And many, perhaps most, experts believe that the 2% target will be hard to achieve, especially within the informal two-year window that the Kuroda team has situated for itself.

One government observer said to me that it won’t be such a big deal two years from now one way or the other. True—if the other economic indices, real GDP, jobs, etc., are in good shape and public sentiment is robust. But if the broader economic outcome is ambiguous, Deputy Governor Kikuo Iwata will have provided critics a big stick to beat the Kuroda team with by putting his job on the line with regard to that two-year timeline at the confirmation hearings. I think that Iwata went out of bounds by drawing his own red line, when Kuroda had not committed himself nearly that firmly.

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